Central goods receipt: structuring logistics processes

As the interface between the outside world and your company, your incoming goods department has a significant impact on costs, quality, time and flexibility. As the face of your company to your suppliers, it should always leave a positive impression and at the same time offer the opportunity to save money.

As the interface between the outside world and your company, your incoming goods department has a considerable influence on costs, quality, time and flexibility.
Philipp Carl, Senior Manager Logistics

In this article, we will show you when a central goods receipt is the right choice for you and arm you with powerful arguments.

The incoming goods department is the logistical link to the supplier or, as mentioned above, “the face of your company to your supplier”. Deliveries to the wrong delivery address, unstructured supplier management, inadequate quality controls, late complaints and much more lead to displeasure and unnecessary costs for both the supplier and your company. Reliability, standardization and lean processes, on the other hand, which a central incoming goods department (ZWE) brings with it, make you the favourite partner of both your suppliers and your controller.

To achieve this, you have to overcome a major hurdle: The immense added value of a centralized incoming goods department must stand up to the fact that you are investing in an area that does not add value. We equip you with powerful arguments that will defend your return on investment even against the most stubborn controller.

1. make the central incoming goods department the starting point for the design of your logistics processes

If you want to be ready for the digital age, your processes must also be ready for it. A centralized goods receipt offers you an optimal opportunity to start a directed material flow at the starting point of your internal flow of goods. To do this, first record all the actual processes that have resulted from your decentralized structure and create your desired/target process, which is made possible by a ZWE.

When designing the target process, don’t forget the basic idea of the “Seven Rs” (right product, in the right condition (quality), at the right time, in the right place, in the right quantity, at the right cost and with the right information) – after all, this is a logistics process. You will be amazed at what a process mapping and process design using workshops can achieve. To do this, I recommend that you visualize all processes so that they are comprehensible and documented at all times. Suitable programs for this are, for example, Microsoft® Office Visio® or Signavio.

If you want to be ready for the digital age, your processes must also be ready for it.
Philipp Carl, Senior Manager Logistics

Advantages of a central goods receipt

The following advantages result from a centralized goods receipt and help you to bring internal departments on board that are essential for the design of the order processing procedure:

In future, you will only have to assign one delivery address. This will significantly reduce the administrative effort and supplier management, especially in the event of incorrect deliveries – check, purchasing is on board.
From a software perspective, a few clear processes are much easier to implement and less error-prone than special processes for 42 goods receipts – check, IT department on board.
From a quality perspective, a central incoming goods inspection can ensure a higher inspection standard, personnel can be planned more effectively and costly equipment (measuring machines etc.) is only procured once. In short: synergy effects and savings in the QM area – check, QM department on board.
As will be explained in more detail later on, a P&D relieves your warehouses and allows you to concentrate on your core competencies: storage, retrieval and material provision. Optimum material provision allows your production to continuously optimize itself and easily meet JIS and JIT requirements – check, production on board.

However, you should still have a separate goods receipt for the following deliveries: For example, incoming goods for large parts that require direct delivery by a heavy goods vehicle with an escort vehicle, or raw materials (long goods, etc.).

Philipp Carl

Senior Manager Logistics

I look forward to your questions!

Would you like to know how you can optimize your incoming goods processes? Then please contact me!

2. benefit from synergies: more incoming goods items with fewer staff

Incoming goods are subject to large fluctuations in delivery volume, number of articles per goods receipt item, vehicle types (e.g. truck, CEP, etc.), loading processes (e.g. side or rear unloading), load carrier types (e.g. sea freight crates, Euro pallets, etc.), types of auxiliary equipment (e.g. forklift, pallet truck, etc.). With such dynamics, only maximum flexibility can help!

Therefore, one of the most powerful arguments in favor of a centralized incoming goods department is flexibility and cost savings through synergies. In a decentralized structure (Fig. 1a), every goods receipt area, from registration to internal goods issue, is represented several times. A centralized solution therefore results in space and equipment savings.

Create a clear allocation of capacity requirements and available personnel capacity per WE area.
Philipp Carl, Senior Manager Logistics

Further savings potential

The savings potential goes even further. As full-time employees (FTE) have to be kept available in the individual WE areas, even though they usually only carry out WE activities part-time, a centralized solution can make better use of employee capacity and thus save costs. In addition, the varying workload of your workforce within the WE areas means that you often do not have a clear allocation of WE activities to personnel capacity.

You should therefore centralize all HR areas and create a clear allocation of capacity requirements and available personnel capacity for each HR area. This will enable you to bundle your services centrally and manage personnel capacities in a more targeted manner. In addition, you will relieve the burden on employees who previously carried out WE activities on a decentralized basis on a part-time basis.

Blog: Comparison of decentralized and centralized goods receipt — Fig. 1: Centralized vs. decentralized goods receipt

Comparison of service supply and demand

How do you make your argument watertight? Carry out a comparison of the “actual” and “target” supply and demand of services and compare the results. To do this, use manual recordings or data analyses based on your transaction database:

The actual heat and power demand per heat generator area in [heat generator items/h] (note: observe peak values)
The output per person per WE area ([WE pos./MA h]) in “actual” and “target”

You can proceed as follows to determine this:

Top-down: Number of employees per WE area (actual situation) divided by the calculated actual WE performance requirement. (Caution: Result usually too low, as secondary activities are included. Further distortion if WE activities are only carried out part-time).
Bottom-up: Manual power consumption when carrying out purely WE activities.

If performance requirements remain the same (actual = target), a smaller number of employees should now be required for the ZWE, as they can provide their capacity centrally due to the synergy effects. If this is not the case, the following points could apply:

In decentralized areas, it is not possible to clearly assign WE activities to personnel.
Specialists are still needed to receive internal goods following the WE process. (Very little effort, however.)

Success Story

New logistics campus in Siegenburg for Wolf

For the leading system provider of heating, ventilation and solar technology, we carried out the design, planning, tendering, selection of suppliers and implementation support for the new logistics campus in Siegenburg.

Zur Success Story

3. standardize as much as you can!

Last but not least, I would like to encourage you to work as much as possible within a standard and to establish standards. Therefore, try to take the following standards to heart:

Legal standards for e.g. customs, quality assurance (e.g. § 377 HGB) etc.
Process standards for the seamless implementation of IT systems. It is best to model your business processes in a standardized universal language such as BPMN.
Transport and provision of production goods: standardization of LHM (loading aids) and THM (transport aids). Use standard LHM and standard THM. Well-known manufacturers for this are Bito or Schäfer.

There’s no such thing as can’t!” It’s a question of will across all areas.
Philipp Carl, Senior Manager Logistics

Start with container loops, for example. You can expand these loops both in the direction of your supplier and in the direction of your internal process chain (Fig. 2 shows two possible container loops). My tip: As soon as a container cycle has been established via a loop (e.g. goods receipt <-> warehouse), it can be successively expanded to include other areas (e.g. production).

A little forewarning: As soon as you come around the corner with the keyword “standardization”, you will encounter resistance and hear sentences such as “that’s not possible, our product portfolio is far too large”. You can confidently reply “It’s not possible, it’s not possible!”. It’s a question of will across all areas. The benefits you achieve through standardization only become apparent once the standard has been established. And until then, it’s a matter of sticking with it, persevering and doing it!

The illustration shows the container cycle between supplier, warehouse and goods receipt. — Fig. 2: Container cycle between supplier, warehouse and goods receipt

4. arm yourself for the two standard arguments against centralized goods receipt

No matter how good the execution of your arguments for centralized receiving may be, be prepared for the two arguments that could make your carefully crafted concept vulnerable. The two arguments are: “poor ROI (return on investment)” and “increase in internal transportation”. Of course, I won’t leave you in the lurch now, so close to the finish line, and will tell you how you can refute these two arguments and thus secure your concept.

ROI is a common key figure for assessing investments in value-adding areas. However, a central goods receiving department is not a value-adding area.
Philipp Carl, Senior Manager Logistics

How to refute the “poor ROI” argument

ROI is a common key figure for assessing investments in value-adding areas and is very often used as a decision-making aid. However, a central goods receiving department is not a value-adding area, so no profits are generated: No profits means low ROI.

An ROI can of course be calculated for a central goods receiving department, whereby the investments and expenses can be compared with the savings from personnel, transportation, space, etc. However, it is usually very difficult to quantify these savings. However, it is usually very difficult to quantify these savings, which is why the ROI puts the actual benefit of the ZWE in a poor light.

It is not advisable to use the ROI as a decision-making aid for the question “central goods receipt yes or no” and is not suitable for the reasons mentioned above. Rather, a comparison of costs and benefits is helpful. For example, the benefit of process preparation for an ERP system is very high, but cannot be evaluated in monetary terms at the time of cost accounting.

How to refute the “increase in internal transportation” argument

The increase in internal transports is possible because in a decentralized solution, the goods receipts can be locally connected to the associated warehouses (see Fig. 1). Of course, this is not possible with a centralized solution and several storage locations, which means that the transport volume can increase. The adaptation and optimization of internal transports can counteract this problem.

The timing of internal transports and optimization of milk runs or general route management invalidates this argument. For the existing factory transport, the new central goods receipt means one more point of contact, and this should not be a problem.

Summary

Consider the idea of a central goods receipt and check whether this is an option for you. If so, start implementing your centralized goods receipt! Prepare yourself with our four lessons learned and get started! Synergy, lean processes and standardization will bring you benefits that you won’t want to miss once you have them.

With the four lessons learned from Rothbaum, you can now take your time to consider the idea of a centralized incoming goods department. We are currently applying our lessons learned with one of our customers in plant construction. We will be happy to keep you up to date and report on our progress and further lessons learned. Do you have any questions or comments about the article? I will be happy to help you at any time. Until then, have fun and just do it!

Philipp Carl

Senior Manager, Munich

The industrial engineering graduate advises his clients on issues relating to warehouse and logistics planning and the digitalization of logistics (particularly in the ERP, WMS and TMS environment). He also provides clients with comprehensive support in the areas of operations management and strategy.